Chancellor Jeremy Hunt pledges £1k annual boost to pensions with City reforms
ITV News Political Editor Robert Peston explains Jeremy Hunt's Mansion House speech pledges from pensions to pay rises.
Jeremy Hunt has pledged a £1,000-a-year pensions boost to the average earner with reforms to get pension funds making riskier investments in start-ups.
He used his first Mansion House speech as chancellor to set out plans to increase returns for pensioners, while supporting high-growth firms and driving economic growth.
In the set-piece address to the City of London on Monday, Mr Hunt hailed an agreement with leading pensions firms to put 5% of their investments into early-stage businesses in the fintech, life sciences, biotech and clean technology sectors by 2030.
While UK pension pots are the largest in Europe - worth £2.5 trillion - defined contribution schemes currently only invest 1% in unlisted equity, limiting returns for savers and funding for businesses, according to the Treasury.
The changes, dubbed the Mansion House Reforms, could help increase the retirement savings of a typical earner who starts saving at 18 by 12% over their career, or over £1,000 more a year once they stop working.
A £50 billion sum of scale investment could also be unlocked if the rest of the industry follows suit.
Aviva, Scottish Widows, Legal & General, Aegon, Phoenix, NEST, Mercer, M&G and Smart Pension are taking part.
Pensions firms welcomed that Mr Hunt was not making the move mandatory, as the industry had warned against.
They will be expected to make investment decisions on the basis of long-term returns, while underperforming pension schemes will be wound up by the regulator, Mr Hunt said.
The government will incentivise investment vehicles to enable schemes to put money into unlisted companies.
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The chancellor said: "British pensioners should benefit from British business success. By unlocking investment, we will boost retirement income by over £1,000 a year for typical earner over the course of their career.
"This also means more investment in our most promising companies, driving growth in the UK."
The Lord Mayor of the City of London, Nicholas Lyons, said he is "proud to have convened key industry players to make this commitment" to allocating more assets to unlisted equities.
Mr Hunt said that the move "will ensure high-growth firms in sectors like fintech and biotech can stay and scale in the UK, and support the development of much-needed new sustainable infrastructure in areas of the country that have felt left behind, while improving the retirement incomes of millions of UK pension savers".
He pledged to prioritise a "strong and diversified" gilt market, meaning he will not force firms to favour riskier investments over the low-risk ones offered by the government.
A "golden rule" was set out by the chancellor of never making changes that "compromise" the UK's position as a leading financial centre.
The government will consult on doubling the existing local government pension scheme allocations in private equity to 10%, and accelerating the transfer of their assets into pools exceeding £50 billion.
Elsewhere, Mr Hunt set out plans to strengthen London's position as a listings destination, including by simplifying the prospectuses companies must produce to raise cash.
He also announced the repeal of nearly 100 pieces of retained European Union (EU) law for financial services to streamline the UK's regulatory rulebook.
Commenting ahead of the chancellor's Mansion House Speech, Shadow City Minister Tulip Siddiq, said: "After 13 years of low growth, stagnant wages and rocketing inflation - these latest empty promises are too little, too late from this failing chancellor.
"Labour's active partnership with the City, reforms to the British Business Bank and modern Industrial Strategy will deliver our mission to secure the highest sustained growth in the G7 and make Britain the best place to start and grow a business."